Dr. Falk Pharma GMBH v. GeneriCo, LLC

• Decision Date: 08 February 2019
• Docket Number: 2017-2312,2017-2636, 2018-1320,2018-2097
• Citation: 916 F.3d 975
• Parties: DR. FALK PHARMA GMBH, Appellant and Salix Pharmaceuticals, Inc., Valeant Pharmaceuticals International, Inc., Intervenors v. GENERICO, LLC, Flat Line Capital LLC, Mylan Pharmaceuticals Inc., Appellees Salix Pharmaceuticals, Inc., Dr. Falk Pharma GmbH, Plaintiffs-Appellants v. Mylan Pharmaceuticals Inc., Mylan Inc., Defendants-Appellees Valeant Pharmaceuticals International, Inc., Salix Pharmaceuticals, Inc., Progenics Pharmaceuticals, Inc., Wyeth LLC, FKA Wyeth, Plaintiffs-Appellees v. Mylan Pharmaceuticals Inc., Mylan Inc., Mylan Laboratories Limited, Defendants-Appellants Actavis LLC, Defendant
• Court: U.S. Court of Appeals — Federal Circuit

916 F.3d 975

DR. FALK PHARMA GMBH, Appellant

and

Salix Pharmaceuticals, Inc., Valeant Pharmaceuticals International, Inc., Intervenors

v.GENERICO, LLC, Flat Line Capital LLC, Mylan Pharmaceuticals Inc., Appellees

Salix Pharmaceuticals, Inc., Dr. Falk Pharma GmbH, Plaintiffs-Appellants

v.Mylan Pharmaceuticals Inc., Mylan Inc., Defendants-Appellees

Valeant Pharmaceuticals International, Inc., Salix Pharmaceuticals, Inc., Progenics Pharmaceuticals, Inc., Wyeth LLC, FKA Wyeth, Plaintiffs-Appellees

v.Mylan Pharmaceuticals Inc., Mylan Inc., Mylan Laboratories Limited, Defendants-Appellants

Actavis LLC, Defendant

2017-2312

2017-2636, 2018-1320

2018-2097

United States Court of Appeals, Federal Circuit.

Sealed Order Filed: February 8, 2019

Public Order Filed: February 20, 2019^*

Mary W. Bourke, Womble Bond Dickinson (US) LLP, Wilmington, DE, argued for appellant and intervenors in 17-2312 and plaintiffs-appellants in 17-2636. Also represented by Kristen Healey Cramer, Dana Kathryn Severance, Daniel M. Attaway ; John W. Cox, Atlanta, GA.

Charles E. Lipsey, Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, Reston, VA, argued for plaintiffs-appellees Valeant Pharmaceuticals International, Inc., Salix Pharmaceuticals, Inc. in 18-2097. Also represented by Bryan Diner, Justin James Hasford, Esther Lim, Kristi L. McIntyre, Washington, DC; Jessica C. Lebeis, Boston, MA.

Michael Isidoro Verde, Katten Muchin Rosenman LLP, New York, NY, argued for appellee Mylan Pharmaceuticals Inc. in 17-2312, for defendants-appellees in 17-2636, and for defendants-appellants in 18-2097. Also represented by Deepro Mukerjee, Lance Soderstrom, Jonathan Rotenberg, Stephanie Mae Roberts ; Howard Robert Rubin, Rajesh Ram Srinivasan, Eric Thomas Werlinger, Washington, DC; Robert Florence, Sharad Kotagiri Bijanki, Micheal L. Binns, Karen L. Carroll, Parker Poe Adams & Bernstein LLP, Atlanta, GA; Christopher Thomas, Raleigh, NC.

Before Lourie, O'Malley, and Reyna, Circuit Judges.

ON MOTIONS

O'Malley, Circuit Judge.

ORDER

At issue are three motions to disqualify Katten Muchin Rosenman LLP as counsel for Mylan Pharmaceuticals Inc. ("Mylan") in three appeals before this court. Valeant Pharmaceuticals International, Inc. ("Valeant-CA") and Salix Pharmaceuticals, Inc. ("Salix") move to disqualify in Valeant Pharmaceuticals International, Inc. v. Mylan Pharmaceuticals Inc ., No. 2018-2097 ("Valeant II " ), Salix moves to disqualify in Salix Pharmaceuticals, Inc. v. Mylan Pharmaceuticals Inc. , Nos. 2017-2636, 2018-1320 ("Salix II "), and Valeant-CA and Salix move to disqualify in Dr. Falk Pharma GmbH v. GeneriCo, LLC , No. 2017-2312 ("Dr. Falk II "). Because we find that Katten has an ongoing attorney-client relationship with Valeant-CA and its subsidiaries, including Salix, we conclude that Katten’s representation of Mylan in these appeals presents concurrent conflicts of interest. Therefore, we grant the motions to disqualify.

I. BACKGROUND

The motions to disqualify stem from Katten’s representation of Bausch & Lomb Inc. ("Bausch & Lomb"), a corporate affiliate of Valeant-CA and Salix (collectively, "movants"), in a trademark litigation and its concurrent representation of Mylan, adverse to movants, in the pending appeals. Specifically, Katten signed an engagement letter with Bausch & Lomb that broadly defined Katten’s client as any Valeant entity. Attorneys Deepro Mukerjee and Lance Soderstrom represented Mylan during various stages of the Valeant , Salix , and Dr. Falk proceedings—first, as attorneys from Alston & Bird LLP, but later, as attorneys from Katten. The parties agree that Mukerjee and Soderstrom moved to Katten as of May 3, 2018. The parties, the engagement letter, and the procedural history are detailed below.

A. The Parties

The parties relevant to the motions to disqualify include, Valeant-CA¹ , Valeant Pharmaceuticals International ("Valeant-DE"), Salix, and Bausch & Lomb. Valeant-CA, a Canadian corporation and the movant in Valeant II and Dr. Falk II , is the ultimate parent of these entities. Specifically, Salix—a movant in all three appeals—is a wholly-owned subsidiary of Salix Pharmaceuticals, Limited, which is a wholly-owned subsidiary of Valeant-DE, which is an indirect, wholly-owned subsidiary of Valeant-CA. Bausch & Lomb is also an indirect subsidiary of Valeant-CA and an affiliate of the above-listed entities.

Valeant-CA contends that it has been a longstanding client of Katten, both directly and through its subsidiaries. Specifically, movants allege that a concurrent conflict arises in all three appeals from Katten’s ongoing representation of Bausch & Lomb in a trademark matter regarding the mark MOISTURE EYES.² A partner in Katten’s Chicago office has been representing Bausch & Lomb since 2001. Verde Decl. at ¶ 8 ("The only affiliate that Katten identified as a current client was Bausch & Lomb, Inc. ... [A] partner in Katten’s Chicago office[ ] has been representing Bausch & Lomb on trademark, copyright and advertising issues since 2001."). Mukerjee admits that he was aware that Katten represents Bausch & Lomb when he moved to the firm. Mukerjee Decl. at ¶ 17 ("During my discussions with Katten in late 2017, I was informed that Katten represents Bausch & Lomb, Inc.").

B. The Engagement Letter & OC Guidelines

In the course of representing Bausch & Lomb, Katten signed a general engagement letter "governing the overall relationship between [Katten] and Valeant Pharmaceuticals International, Inc."—i.e., Valeant-CA. Gorman Decl. Ex. A, at 1. This engagement letter incorporates by reference Valeant’s Outside Counsel Guidelines ("OC Guidelines" or "Annex 1").

Section 1.1 of the OC Guidelines states that "[t]hese guidelines will govern the relationship between Valeant Pharmaceuticals International[, i.e. Valeant-DE], its subsidiaries and affiliates ... and outside counsel." Gorman Decl. Ex. A, at § 1.1. The terms of the OC Guidelines also require that Katten complete a conflict check "before representation of [Valeant-DE and its subsidiaries and affiliates] commences." Gorman Decl. Ex. A, at § 1.2. The terms further state that "[a]ny conflict of interest that is discovered in such a check or that develops during an ongoing representation can only be approved, waived or otherwise cleared by the written agreement of the Valeant General Counsel." Gorman Decl. Ex. A, at § 1.2. The OC Guidelines do not define "conflict of interest," but state that "Valeant expects its firms to adhere to local rules and ethics rules relating to conflict of interest and client representation." Gorman Decl. Ex. A, at § 1.2.

The OC Guidelines also specify that "Valeant expects a significant degree of loyalty from its key external firms," defined as "firms with 12 month billings exceeding one million dollars." Gorman Decl. Ex. A, at § 1.2. These key firms should "not represent any party in any matters where such party’s interests conflict with the interests of any Valeant entity." Gorman Decl. Ex. A, at § 1.2. Finally, the OC Guidelines state that they "will continue to apply unless revoked in writing by either party or modified by a subsequent letter signed by Valeant General Counsel and outside counsel." Gorman Decl. Ex. A, at § 1.5. Salix and Valeant-CA contend, and Mylan does not dispute, that the engagement letter, including the OC Guidelines, remains active under this provision.

C. The Procedural History

1. Valeant proceedings

Valeant-CA and Salix sued Mylan on November 19, 2015, alleging that Mylan’s submission of an abbreviated new drug application constituted an act of infringement under 35 U.S.C. § 271(e) of, inter alia, U.S. Patent No. 8,552,025 ("the ’025 patent"). Valeant Pharms. Int'l, Inc. v. Mylan Pharms. Inc. , 2:15-cv-08180-SRC-CLW, 2018 WL 2023537 (D.N.J. May 1, 2018) (" Valeant I "). Valeant-CA and Salix hold substantial rights in the ’025 patent, which is listed in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations (commonly known as the "Orange Book"). Valeant-CA and Salix moved for summary judgment of no invalidity for claim 8 of the ’025 patent. The district court granted the motion on May 1, 2018. Valeant I , ECF No. 300.

Mukerjee and Soderstrom, then at Alston & Bird, represented Mylan throughout the district court litigation. On May 3, 2018, Mylan notified the district court that Mukerjee and Soderstrom had left Alston & Bird to join Katten. On May 25, 2018, Valeant-CA filed a motion to disqualify Katten in the district court action. Mylan timely appealed the district court’s summary judgment on June 22, 2018. Valeant-CA then filed a motion to disqualify Katten in this court on July 9, 2018, and the district court stayed a decision on the motion to disqualify pending before it. We stayed the parties' briefing on the merits in this appeal pending our decision on the motion. Valeant II , ECF No. 24.

2. Salix & Dr. Falk proceedings

Salix and Dr. Falk are related, parallel proceedings before a district court and the U.S. Patent Trial and Appeal Board ("Board"), respectively. Salix Pharms., Inc. v. Mylan Pharms. Inc. , 1:15-cv-00109-IMK (N.D. W. Va. Sept. 12, 2017) ("Salix I "); GeneriCo, LLC v. Dr. Falk Pharma GmbH , IPR2016-00297, 2017 WL 2211672 (P.T.A.B. May 19, 2017) (" Dr. Falk I "). Both proceedings involve U.S. Patent No. 8,865,688 ("the ’688 patent"), which is owned by Dr. Falk and exclusively licensed to Salix.

In Salix I —the district court proceeding—Salix and Dr. Falk sued Mylan on June 26, 2015, alleging that Mylan’s submission of an abbreviated new drug application constituted an act of infringement under § 271(e) of the ’688 patent, which is listed in the Orange Book. Attorneys from Parker Poe represented Mylan throughout the district court litigation in Salix I . On April 22, 2017, a month after trial was complete, Mukerjee and Soderstrom, then of Alston & Bird, entered appearances in the district court action. After entering an appearance, Mukerjee took part in negotiating the stipulation to dismiss Mylan’s counterclaims. The...